Supreme Court Holds That Section 10(B) Of The Securities Exchange Act Applies Only To Domestic Transactions

On June 24, 2010, the U.S. Supreme Court ended nearly a half century of speculation over the extraterritorial application of the United States securities laws. In Morrison v. National Australia Bank Ltd., the Court held that Section 10(b) of the Securities Exchange Act of 1934, the principal anti-fraud provision of the federal securities laws, applies only to transactions in securities that are listed on domestic exchanges and domestic transactions in other securities. In so holding, the Court affirmed the dismissal of a “foreign-cubed” securities class action, i.e., a private action brought in the United States by foreign purchasers of securities issued by a foreign company traded on a foreign exchange. The Court rejected an analysis widely used by the lower courts that permitted such lawsuits when the transactions had a substantial effect on the U.S. market or significant conduct in the U.S.